Are International Market ETFs Worth Adding to Your Portfolio in 2025?

As U.S. equity markets continue their strong rally this year, a compelling narrative is emerging among global investors: international equities are actually outpacing domestic returns. Through August 28, 2025, the S&P 500 has delivered a respectable 10.55% year-to-date gain. However, the MSCI World ex USA Index—which tracks large and mid-cap companies beyond U.S. borders—has surged approximately 19% during the same period, according to Fidelity Investments. This divergence raises an important question for portfolio managers: should they be tilting toward international market exposure through ETF allocations?

The Case for International Diversification

The outperformance of international equities has sparked renewed interest in global exposure. Fidelity’s analysis reveals three distinct categories of international market ETF opportunities, each catering to different investment philosophies. Whether seeking current income, value-oriented positioning, or growth potential, investors can find vehicles aligned with their strategic objectives.

However, this opportunity comes with caveats. The tariff landscape remains fluid, with ongoing policy uncertainty potentially creating continued market volatility. Additionally, the substantial year-to-date gains across many international ETFs raise questions about valuation and remaining upside potential.

Income-Oriented International Market ETF Options

For income-focused investors, the international ETF space offers compelling yields. Fidelity screened for international equity funds with 30-day SEC yields of 4.2% or higher, identifying several standout performers:

• iShares International Select Dividend ETF (IDV): +34.11% year-to-date
• Fidelity International High Dividend ETF (FIDI): +24.95% year-to-date
• Franklin International Low Volatility High Dividend Index (LVHI): +14.52% year-to-date
• Wisdom Tree Emerging Markets High Dividend Fund (DEM): +14.43% year-to-date

These international market ETF selections demonstrate that dividend-paying equities globally remain attractive even as fixed-income yields have compressed from earlier 2025 levels.

Value-Focused International Market ETF Strategies

Value investing gained traction early in 2025, and while growth stocks have begun capturing investor attention, the fundamental case for undervalued international equities persists. Fidelity identified international ETFs meeting specific valuation thresholds: price-to-trailing earnings ratios at or below 14.79, price-to-sales ratios of 1.18 or lower, and price-to-book ratios capped at 1.72.

The resulting international market ETF selections showed robust returns:

• iShares MSCI EAFE (EFV): +28.31% year-to-date
• Schwab Fundamental International Equity ETF (FNDF): +27.41% year-to-date
• Fidelity International Value Factor ETF (FIVA): +27.26% year-to-date
• Vanguard International (VYMI): +24.26% year-to-date

Growth-Oriented International Market ETF Selections

Fidelity projects that growth-oriented strategies may extend their outperformance if current momentum sustains. The firm identified international equity ETFs exhibiting cash-flow growth rates exceeding 21.5% and sales growth surpassing 11.9%:

• Fidelity Fundamental Emerging Markets ETF (FFEM): +19.08% year-to-date
• iShares MSCI Emerging Markets Ex China ETF (EMXC): +15.76% year-to-date
• Capital Group International Focus Equity ETF (CGXU): +14.84% year-to-date
• iShares MCSI Emerging Markets Min Vol Factor ETF (EEMV): +9.04% year-to-date

Implementation Strategy and Risk Considerations

Given the substantial gains already captured across these international market ETF categories, a measured approach to portfolio integration makes prudent sense. Rather than deploying capital in large tranches, consider building positions incrementally throughout the remainder of the year. This dollar-cost averaging strategy can help mitigate timing risk and reduce the impact of potential pullbacks.

The intersection of tariff uncertainty and elevated valuations suggests that international market ETF exposure should be sized appropriately within overall portfolio construction. Whether your preference leans toward income generation, value-oriented positioning, or growth trajectories, the international ETF landscape offers viable options for meaningful diversification gains in 2025.